December 27, 2022
Weekly Update
The much-anticipated Santa Claus rally has yet to materialize on Wall Street, though at least the recent losses mostly stopped for the indexes last week. The S&P 500 was virtually unchanged, the Dow gained 0.88%, and the Nasdaq fell 2.5%.
Stocks on Watch
Not surprisingly, ahead of the long holiday weekend, option activity, and trading in general, was very quiet last week. And while I am patiently waiting to add exposure to the portfolio, which has been the best course of action almost all of 2022, I can tell from subscriber emails that many COT/COTP subscribers are looking for stock rebounds for mega-cap tech in 2023. Because of that, here are some ideas:
AAPL –
Buy of May 135 Calls for $11.50, or Buy of May 135/165 Bull Call Spread for $9.50
Buy of January 135 Call (exp. 1/19/2024) for $20, or Buy of January 135/180 Bull Call Spread for $14 (exp. 2024).
AMZN –
Buy of June 85 Calls for $12, or Buy of June 85/115 Bull Call Spread for $10
Buy of January 85 Calls for $17 (exp. 2024), or Buy of January 85/130 Bull Call Spread for $14.
TSLA –
Buy of May 125 Calls for $23, Or Buy of May 125/180 Bull Call Spread for $17
Buy of January 130 for $34 (exp. 2024), or Buy of January 130/200 Bull Call Spread for $20.5 (exp. 2024).
I am not adding any of these trades to the portfolio, as I have not yet seen a persistent bid for these stocks. That being said, I certainly am not opposed to any of these trades (and kind of like them), especially if the selling pressure abates once the calendar flips to 2023.
Volatility
The Chicago Board of Options Exchange Volatility Index (VIX) closed the week at 21, or virtually unchanged. There isn’t much to say about the VIX last week as option action was slow, and the markets were mostly unchanged.
I would expect (though don’t guarantee) similar action this week, before trading starts to ramp up again in early 2023.
Option Order Flow was fairly mixed this past week as my Options Barometer came in at:
Monday – 5
Tuesday – 5
Wednesday – 5
Thursday – 5
Friday – 5.
Events for the Week to Come
As noted above, this should be a quiet week of trading as economic data releases, Fed speak, and earnings announcements will be extremely limited coming out of Christmas and ahead of New Year’s.
What Traders are Saying
Below are the 2023 forecasts for the S&P 500 in 2023. And while it’s always interesting to see what Wall Street’s best and brightest are thinking for the market, I would note that the 2022 predictions, as seen further down the page, were WAY off:
2023 S&P 500 forecasts:
Deutsche Bank 4500
Oppenheimer 4400
BMO 4300
JPMorgan 4200
Jefferies 4200
Wells 4200
Evercore 4150
RBC 4100
Credit Suisse 4050
Goldman Sachs 4000
HSBC 4000
Citi 4000
BofA 4000
UBS 3900
Morgan Stanley 3900
Barclays 3725
SocGen 3650
BNP Paribas 3400
2022 S&P 500 forecasts:
Oppenheimer 5330
BMO 5300
DB 5250
CS 5200
GS 5100
JPM 5050
RBC 5050
Citi 4900
UBS 4850
Cantor 4800
Barclays 4800
Wells 4715
BofA 4600
MS 4400
Since these folks are guessing, and it doesn’t matter if they are right or wrong, I will do the same … Jacob Mintz’s totally unscientific guess for the S&P 500 closing price in 2023 is 4,395, or higher by 15%.
Open Positions
Bank of America (BAC) February 36 Covered Call – Last Tuesday we sold the February 36 call for $0.44 ahead of earnings for the leading financial player in mid-January.
Blackstone (BX) March 80 Puts – BX fell another 1% last week and continues to look suspect, especially as put buying piles up.
Biotech ETF (XBI) January 84 Call – The XBI looked weak on Monday, then great on Tuesday and Wednesday, and then fell again on Friday. Such is the annoying choppy action with this sector, and the market in general. Time, and my patience, is running out with the balance of this position.
Alphabet (GOOGL) February 120 Calls – Similar to the XBI, GOOGL continues to chop aimlessly. Not much more to add, other than it will be interesting to see if mega-cap tech gets going again when the calendar flips to 2023.
Cameco (CCJ) January 24.5 Covered Call – On Tuesday of last week we sold the January 24.5 call against our stock holding for $0.26. While the premium received is not overwhelmingly large, it is like a “dividend” while we wait to sell a bigger premium call ahead of earnings in February.
Las Vegas Sands (LVS) March 44 Call – LVS fell 2% last week, though it looks totally fine. Our calls remain in solid shape.
PayPal (PYPL) March 80 Call – PYPL still looks awful, though of note, on Thursday a trader/traders aggressively bought the following call positions:
Buyer of 6,300 PayPal (PYPL) February 75 Calls for $2.85 – Stock at 67.5
Buyer of 5,000 PayPal (PYPL) January 66 Calls and 8,000 January 68 Calls – Stock at 67.5.
Pinterest (PINS) March 25 Call – PINS fell 1% last week, which far outperformed its growth stock peers. IF this market can get off its knees, I continue to think PINS has “the look” of a star.
S&P 500 ETF (SPY) March 420 Puts – Our SPY puts are now at a potential profit of 70%, and I will continue to hold this hedge in a suspect market.
Starbucks (SBUX) January 85 Calls – Our SBUX calls are now at a potential profit of 115%. Not much more to add as the stock has mostly traded in-line with the market in recent weeks.
Vale (VALE) June 17 Calls – VALE gained 4%, and looks terrific. As noted late last week, on Wednesday a trader bought 5,000 of the same calls we own, which is encouraging.
